9. New Management Revitalizing Precision Instrument Maker
(LDII)
Monday, July 20, 1998
Small-cap advisor Richard Geist first recommended precision
measuring instrumentation maker Larson Davis (LDII) several
years ago when the stock sold for $5, and he happily watched
it climb to $12. Though the previous management team
convinced Geist that further appreciation was forthcoming,
the stock crashed and has sat at $2 ever since. But he did
not sell, and as the firm now has new management in place
Geist says "the time has come to begin accumulating the
stock again."
Geist says the new team inherited "a slightly out of control
R&D house," with technologies in various stages of
development but clearly not ready for market. The company
was spread too thin and missed every commitment they made.
The new LDII, however, is a credible commercial manufacturer
that focuses on three technology products. A flight mass
spectrometer has an even chance in a competitive market; its
fluid chromatograph instruments enjoy good market acceptance
in a market with little competition; and a unique cross
check technology has enormous potential in a number of
markets.
Management is also cutting costs, and LDII halved its burn
rate to $1 million in Q1 98. If successful with the products
mentioned above, management hopes to attain profitability by
4Q 98, "which would be an amazing turnaround given where the
firm has come from," Geist says. He is betting that
management can do it and suggests accumulating shares of
LDII.
For more on Richard Geist's recommendation see "Financial
Strategies," July 1998, Richard Geist's Strategic Investing:
Richard Geist integrates psychological aspects of investing
into a methodology for selecting small company stocks.
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